How Steady State Will Revolutionize Insurance for the DeFi Industry
13 October 2021 - 4:19AM
NEWSBTC
Risks such as flash loan exploits, hacks, and stablecoin de-pegging
are a serious deterrent for DeFi adoption. Now Steady State is
seeking to push DeFi out of the “fear zone” by insuring funds held
on decentralized protocols. Insurance for DeFi Steady State is
launching a comprehensive insurance solution for decentralized
finance (DeFi). The project shifts responsibility from individual
users, and the protocol holding the underlying assets, and
transfers that responsibility to Steady State insurance.
Theoretically, this should allow all parties to sleep more soundly
at night. Decentralized finance in its current form can never fully
realize its potential: the risks from flash loan exploits, hacks,
and stablecoin de-pegging mean that a large swathe of potential
investors will simply never venture into the market. Any cursory
examination of the sector makes it easy to understand why that is.
A single flash loan attack in February of this year drained $37
million from C.R.E.A.M. protocol tanking the price of its native
token by 30% in half an hour. In May, flash loan exploits on a
single chain, Binance Smart Chain, totalled $167 million. These
sorts of reports effectively place a handbrake on the market,
slowing its growth and making bigger investors and institutions
turn away. Without the additional safety that an insurance solution
such as Steady State can provide, the growth of the sector will
always remain underwhelming. Steady On Steady State posits that
insurance issued through smart contracts can help to create a more
efficient and better solution for decentralized finance. Parts of
the insurance process which are currently carried out by humans
(with all their inherent biases) can instead be carried out
logically with code. Users can interact with the platform by first
staking their assets as collateral, with Steady State using the
capital to underwrite DeFi protocols. Users are rewarded for
staking while simultaneously safeguarding funds. The project
operates on what is called a direct-to-protocol basis. According to
Steady State, the use of their insurance coverage and index pools
optimizes capital efficiency. Steady State sources liquidity in a
novel way which they say cannot be accomplished with user-centric
models. All of this takes place in a community-centric environment,
creating insurance policies that go beyond individual cover and
instead cover multiple risk vectors for entire communities. Steady
State has tagged this model “DeFi insurance 2.0”. Building the
Market Steady State hopes that their approach to DeFi insurance
will allow for the growth of a true risk market, inviting users to
buy and sell collateral on a liquid secondary market. This will
allow users to sell funds that may otherwise be locked up in
insurance smart contracts. Over time it is expected that this form
of collateral trading will help to further spread risk and make the
ecosystem more robust. This will, in turn, help to build the
credibility of the DeFi market, inviting large investors and
institutions to participate in a number of ways. Insurance could
even be a strong primary driver of adoption, as an area in which
institutions can see a path towards direct participation in the
market. If Steady State can create a solution which onboards
existing DeFi users and attracts a fresh influx of capital from
institutions and whales, the company could indeed be set to
revolutionize the insurance industry.
TRON (COIN:TRXUSD)
Historical Stock Chart
From Apr 2024 to May 2024
TRON (COIN:TRXUSD)
Historical Stock Chart
From May 2023 to May 2024